Shaftesbury Capital Shares Downgraded as Morgan Stanley Sees Sector-Level Performance

Shaftesbury Capital shares (LON:SHC) are trading 3.87% lower today, experiencing a shift in market sentiment following a downgrade by Morgan Stanley, suggesting a potential alignment with the broader sector's performance after a period of outperformance.

This adjustment comes amidst a backdrop of strong financial results and strategic activity.

The downgrade to “Equal Weight” from “Overweight” by Morgan Stanley, with an unchanged price target of 170p, signals a tempered outlook on the stock's future trajectory. While the firm acknowledges Shaftesbury Capital's leading rental growth and robust balance sheet, the expectation is that the stock will now perform more in line with the sector average after a year-to-date increase of almost 11%.

This perspective introduces a note of caution after a period of significant gains.

Despite the downgrade, Shaftesbury Capital has demonstrated robust financial health. Interim profits saw a significant increase, rising to £173.0 million from £86.3 million in the previous year, largely driven by a revaluation gain of £146.7 million.

Revenue also increased by 5.8% to £117.6 million, and the portfolio valuation rose by 3.1% to £5.2 billion, reflecting active leasing and asset management. The company declared an interim dividend of 1.9 pence, up 12% from the previous year, underlining its financial strength.

Adding to the positive momentum, Norges Bank Investment Management (NBIM) acquired a 25% stake in Shaftesbury Capital's Covent Garden estate for £570 million, valuing the entire estate at £2.7 billion. This significant investment by Norway's sovereign wealth fund reflects confidence in London's commercial property sector and provides Shaftesbury Capital with resources to manage debt, enhance properties, and expand its West End holdings.

Furthermore, a trading update prior to the Annual General Meeting highlighted strong demand across its West End portfolio, with 128 leasing transactions representing £11.3 million in new contracted rent, 8% ahead of December 2024's Estimated Rental Value (ERV). The annualized rent roll increased by 3% since year-end to £210 million, with high occupancy levels.